Making everyone happy is impossible. Pissing them off is a piece of cake. I like cake.

Saturday, November 26, 2011

Of pension pots and piss-takers

As we all must know by now, a number of unions are striking at some point at the end of this month; I haven't kept track of which ones because, fundamentally, I have bugger all interaction with the state and so don't expect to notice anything except a bunch of molly-coddled parasites mouthing off in the centre of London.

The main driver for this "super-strike" is that the government has pointed out that the gold-plated, defined-benefit, public sector pensions are utterly unaffordable and intends to change the terms of the deal. Finally.

Not that they are intending to switch away from defined-benefit pensions—oh no! What they are proposing is that public sector workers pay in an extra 3% of their salary towards their absurdly generous retirement salaries. And this is, apparently, a problem.

But listen to any public sector worker whinge and you'd think that every third one of them was being sent to a gulag, not being asked to pay a fraction closer to what they should be. You can see these parasitical fools commenting on blogs (as well as hear them in person), saying things like this...

A nurse retiring on a salary of £34,200 after 40 years would receive a pension of £22,800. To obtain that level of income from a private sector pension at current annuity rates, a worker would need to amass a pension pot of £600,000, the Treasury said.

According to pensions experts at Hargreaves Lansdown, a private sector worker on the same income who saved the average of 9 per cent of salary into a pension over a career might build a pension pot of £258,000.

They estimated that to save £500,000 into a private pension, a worker would need to start by setting aside £600 a month from the age of 23. Someone who earns £40,000 and puts aside 9 per cent into a workplace pension is only saving £300 a month.

So, here's a message to public sector workers—I am happy for you to receive what you have paid for. And that is a pension pot of rather less than £250,000. And when you retire, you can take that pension pot and invest it in an annuity pension, as the rest of us are forced to do (by law).

And the earlier you retire—and we all know that public sector workers have a tendency to retire rather earlier than everyone else. Presumably because of the stress associated with filing forms in triplicate—the less your pension income will be.

That is what the rest of us have to do. And, as you say, you only want what you've paid for.

Oh, wait—you don't want that?

Oh right! You don't actually want what you paid for? Oh yes, you want what you were promised—even though it was patently unaffordable?

Is all this tax necessary? Well that depends on your political stance. Some would argue that it isn’t enough, others that it is too much. You can ignore the latter, because they’re borderline communists, but the fact is that I don’t have a say in the matter – it just is. Certainly there’s no-one pressing the case for lower taxes that I can vote for. And now we owe the world about £14 squazillion we’re not going to turn into the Cayman Islands anytime soon. We’ve moved barely an iota from the age in which you’d pay your tithe to the Lord of the Manor regardless of how rotten your turnip harvest had been or how many of your kids had pegged it with tubercolosis.

But among the ways in which it is spent are on the pensions of public sector workers. Do I wish them a ruinous old age of poverty and want? Of course not. Do I think that every one of them is a worthless mouth or an unproductive presence on the planet? Equally no. Do I think that I should not only foot the bill for their wages, but for a retirement that is way beyond my own means to afford as well? Thrice no. As Samuel L Jackson might put it: “fuck that shit”.

Quite.

So go ahead and strike—see if anyone gives a crap. In the meantime, I hope that you have many more strikes and lose many, many days of your wages.

UPDATE: as a number of commenters have pointed out, the Telegraph have done their figures wrong. The nurse could only receive a maximum pension of half her salary—roughly £17,000.

The general point still stands, however, since the Guardian's rather detailed calculator estimates that in order to reach the desired amount of 50% of salary—assuming 40 years of contributions, 20 years to live after retirement, a 7% return, and 4% inflation—the nurse would have to pay £485 per month, every month, from the age of 20.

Even on £34,000, £485 per month (from a take-home salary of £2,123) represents a contribution of nearly 23% per month—rather higher than the standard 9%–12.5% paid by public sector workers.

UPDATE 2: this little calculator (with some pretty graphics), estimates that our nurse would have to pay in 14.7% of her income—some £416.50 per month—in order to reach £17,000 per year retirement income (assuming no lump sum, of course).

If she wanted the maximum 25% lump sum of roughly £93k, and have a pension income of £17,000, those contributions would need to rise to £462.97 (16.34% of £34,000).

I stress, again, that these payments need to be every month—whether the nurse is earning £20,000 at 20 or £34,000 at 60. So, whilst £416.50 is only 14.7% of £34,000, it is more like 25% of £20,000.

What genuinely makes me sick is when people who are protected from the consequences of their own incompetence, inefficiency and stupidity try to blame private companies for not paying enough. Only public sector morons do this as they are used to a world of money growing on trees called the private sector, and they have never been affected until now, by the realities of the economics of the world.

2nd : Agree with the tenor of your argument. We have a good pension. I will not be striking.

3rd: I'd quite like to pay more in but keep my retirement age the same. Under current proposals, that's not an option. I can pay more and retire later for slightly more pension. I would like to pay even more, retire at the same time with my current pension. This would require, as you say, a hefty increase in my monthly payments: my choice, but no politician would date propose such a huge hike!

4th: could you check your numbers? I thought the NHS pension worked in 80ths, so a 40yr pension equals 40/80 basic salary. Your nurse would therefore get 17100. Happy to be corrected on this.

I'm fine with them striking. Remember the last time that happened, with the civil servants a few months ago? I do, but only because I read about it, and not because I was so much as slightly inconvenienced by it. Own goal!

If they strike enough times, remember, a good chunk of us might start thinking "wow, we don't need these useless cunts at all" and maybe, just maybe, vote for a party that will fire them en masse. Teehee.

I can't help thinking, that if it takes a mere 2 days to train an civil servant to cover for a striking 'immigration officer' - presumably lessons on how to sniff panties and check that the passport photograph matches the person's face - what's to stop the government closing the borders for two days, sacking the lot of the strikers, and replacing them with the long-term unemployed?

As other posters have said the pension calculation is wrong as the NHS scheme is still based on 1/80th of final salary per year served. You also receive a tax free lump sum of 3x the yearly pension.

I suspect that the error was caused by using the local government rate of 1/60th per year which would give the figures in the article. Either way it's much better than most of the private sector will receive.

Why not just leave the pensions as they are, but tax them at a higher level to reduce the inequity.

Thus the badly paid frontline workers such as teachers assistants are taxed on pension income as normal, but the part of any public sector pension over £20,000pa gets taxed at 85% and anything over £30,000pa at 99.5%.

No need to change any contracts so nothing to build up a media storm and the public sector wallys are always calling for tax rises so let them pay their fair share.

Civil servants don't get bonuses unlike you private sector wankers. Also, you only get out of a pension scheme what you put in. If private sector workers paid the same as me (12.5%) they too would get a half-pay pension after 40 years paying in.

Yes, I'll admit that this aspect of it gave me pause for thought. But then I thought, "if my boss came to me and told me that if I didn't take a smaller pension, the company would go bust and I'd get fuck all", I reckoned that I would accept that.

Further, we tear up existing agreements all the time. Do you sign a new contract every time that you get a pay rise? Does it even get added as an addendum to your contract? I bet it doesn't.

Seeing as how pensions stuff is part of my business I can confirm that my calculations have demonstrated that if anyone puts away about 15% of their gross pay for their working life of 44 years (21 to 65) they will get a pension of about 50% of their final salary.

The major problem with state workers pensions is that they are entitlements. It is irrelavent to the state employee how the broader economy performs and how the private wealth creating sector creates wealth. These people are entirely disconnected from economic reality. A proper reform of state employees pensions would move them all to funded money purchase schemes with flexible retirement ages with taxpayer contributions capped at 8% (note, state employees are not tax payers,they are tax consumers). This would have the double benefit of connecting them with reality and provide real savings for investment.

When I am dictator this is in my to do list at Number 1 and will be carried out on Monday morning. (In the afternoon I will shut down the Bank of England, or rather cancel its legal tender monopoly, but that's another story)

Public sector workers need to get real and stop waving silly banners with 'Fair Pensions For All' written on them. The selective 'ALL' they refer to doesn't seem to include us tax paying private sector cash cows. I have a private sector pension and feel lucky. There are those who have been saving all their lives only to have it completely collapse in on them. I've gone through pension changes from those that there were written into agreements when I first started working for my previous employer. The pension contributions increased from 6% in 1979, to 9% in the late 1980's, 11.5% in 1995 finally to 13.4% in 2000 - a 224% increase not 50% this lot are whinging on about. I also had to work longer to get the full pension - from 65 - 67 again far longer than any public sector worker and because the way in which the pension was re-calculated (thanks to good old Gordon Brown and his highway men)I had to take a 12% reduction in my pension. Reality comes in when you use common sense - the question is do you want a pension with reduced payouts and with increased contributions or no pension?

1. If I have paid into a pension for 20 years and I'm now told it's all bunkem, can I have my 20 years contributions back please? The answer is no, which is a shame :(

2. In the years when I did get a pay rise, it never exceeded inflation, and the reason is always given that my pension is so generous, and therefore expensive to my employer. So now that my pension is going to be less expensive to fund afterall, can I have those back pay rises. Please.

3. My employer never actually paid anything into my pension (it is "unfunded", you see, although they did take my money). And I never had a choice to opt out of the state-run theft scheme, and have my employer contribute to a personal arrangement.

I shan't be striking as I fear public sector productivity will massively improve on the strike days, as those actually at work only do those things that are essential to the proper performance of Governing.

Yes, I'll admit that this aspect of it gave me pause for thought. But then I thought, "if my boss came to me and told me that if I didn't take a smaller pension, the company would go bust and I'd get fuck all", I reckoned that I would accept that.

Well, let's try a variation on this theme - suppose your boss said you will have to receive a smaller pension because of the largesse of the bankers?

But will the bankers still receive megabonuses you understandably enquire - of course they will, says your boss patting you on the head ....... of course they will.

Still, look on the bright side at least the high rolling nurses are getting screwed as well.

I think you've confused yourself a bit on the pension calculation, you don't pay a fixed amount, you pay a percentage of your salary.

According to the thisismoney.co.uk calculator, it would take a pension pot of £442,000 to purchase a £17,000 index-linked annuity.

For a worker on a final salary of £34,000, working for 40 years, with a return of 7% and inflation of 4%, to get a pot of that size would require contributions of 18%. 6% employee, 12% employer is what I get in the private sector and I consider it a pretty generous scheme, so by the looks the 1/80th accrual rate public pensions are good but no outrageous.

However, anyone getting the 1/60th rate is getting the same pension as someone who worked for 30 years putting in 41% of their salary. So, the 1/80th salary I can accept, the 1/60th one is far too generous.

Ok, reading the comments I've left out the £51,000 lump sum. Adding that onto the pension pot means a required pot of £493,000, which would require 20% contributions. 7% / 13% split, again not too unreasonable.

"Well, let's try a variation on this theme - suppose your boss said you will have to receive a smaller pension because of the largesse of the bankers?"

In what possible private sector situation would that happen?

Let's try a new thought experiment: hey! A&E, if you want to get your pension, you have to go out and viciously mug, beat up 5 people—every day—in order to get your pension. You must watch their children starve, see them get turned down by CAB, and thrown into a debtors' prison.

Let's be generous and assume you earn £40,000 per annum every, single year that you have been a civil servant; if you paid in 12.5%, your pension pot would be some £200,000.

That assumes that the pension pot is merely put under the mattress. Even investing it in gilts would bump up the numbers a bit - and your main piece cites the example of someone retiring on £34.2k and contributing 9% would end up with a £258k pension pot. Of course that depends on the performance of the investments concerned - but there's nothing like a bit of inflation to make the gross figures look good....

Another thing - compulsory annuity purchases were abolished in this year's Budget.

Given all the union hype about the NHS scheme being in surplus at the moment, it's worth looking at http://www.nhsbsa.nhs.uk/Pensions/Valuation.aspx for the true miserable state of that particular Ponzi scheme.

Another non-striking public servant here. I cannot conscience trying to coerce the government to coerce future taxpayers to fund a particular class of (in my case)office workers in relative luxury. A fair balance has to be sort between those that receive and those that are made to pay under threat of prosecution. Yet try getting others to see it in a more balanced way is an exercise in futility.

Today one of my colleagues told me that when the average private sector pension was calculated for comparison purposes, they left in everyone in the private sector who had no pension at all. I inferred from his manner and his wish to share this that he felt that this in some way "unfairly" made public sector pensions seem better than they really were. Presumably, if every person in the private sector had zero pension bar one person with a vast sum, then they could count themselves vastly lucky as a group compared to he public sector!

Well, let's try a variation on this theme - suppose your boss said you will have to receive a smaller pension because of the largesse of the bankers?

Oh and that again....on and on and on and on...please, make your case on its own terms or you just sound desperate - and what level of self-regarding behaviour couldn't the existence of "bankers" justify for you in your world I wonder?

Contracts are contracts - well they bloody well should be to a libertarian.

Of course, we currently have a different government to the one that was in power when I signed my original contract of employment. So how is it binding on a third party? Plus, neither party in the original arrangement are the ones that are going to end up actually paying the cost - that will be the future individual taxpayer that had no say in the agreement. So they at least are under no moral obligation to abide by a contract on which they had no say, made by a past government they did not vote for.

Dear oh dear,Such venom. I have a pension, 'tis a public pension, and one that is inflation proofed, and guess what? I am also in receipt of that pension.

I worked for 40 odd years, regulating private industry. Saving them from their worst excesses, so that we ended up with a society that is whorthwhile. If we have a nation run by the business/capitalist minnions of the 'upper class', we achieve a nation that is very deficient.

However, some of you will not agree, and you will say that the only person worthwhile in our society is one who is able to 'turn a buck'.

What about the poison on this blog? what about the language, and an obvious lack of perception?

I truly support your right to say anything you want about me, as long as you will do the same for me. However, what about Stan Colymore and his tweet complaint?, what about Dianne Abbott and her comment regarding 'white people'?

Surely, we can't have this recourse to Law regarding comment, and yet the blogosphere continues to generate such hate towards us saintly Civil Servants.

Which reminds me, I must contact a few of my old chums and ask if they might amend a few bits of this and that, so that the playing field is evened out a tad.